Downsizing Strategies And Corporate Performance Amongst Commercial Banks In Kenya

ABSTRACT

Downsizing is currently one of the most popular strategies being used by organizations in an effort to survive and compete in the current business environment. Despite the growth of downsizing, controversy surrounding its benefits still persists. However, since downsizing eliminates redundancies and reduces employment costs, many executives believe that this practice helps firms to compete efficiently and improve profitability. In Kenya, a multitude of private sector corporations, governmental agencies as well as ministries have adopted downsizing as a strategy of addressing poor and declining performance with mixed results. Therefore, this research sought to evaluate the role of downsizing strategies in the performance of commercial banks in Nairobi County, Kenya. The study employed a survey design and specifically a cross-sectional research design. Primary data was collected using standard questionnaires assigned to human resource managers in the selected organisations while secondary data was collected via a review of literature on downsizing and corporate performance. Data was analyzed using descriptive statistics. Results were presented in form of tables and in prose form. Out of the thirty nine questionnaires that were distributed to the targeted respondents, twenty five were correctly filled and returned. Results show that while the workforce reduction, organization redesign and systemic downsizing strategies are used by commercial banks in Kenya, certain aspects of these strategies have a negative impact on organizational performance, while others have a positive impact on performance. Based on the findings of the study, the researcher came up with recommendations which are meant to be of practical and theoretical significance. First, organizations need to develop and clearly spell out guidelines for downsizing so as to be able to implement workforce reduction strategy correctly. Second, before embarking on any major organization redesign, organizations should take the time to do a strategic analysis so as to enable them to have a clear idea of their missions, challenges and opportunities in order to know why, how and to what extent they must undergo structural changes, if any. Third, the systemic downsizing strategy offers the best option for long-term, sustainable organization performance, as successful downsizing goes well beyond simply reducing total staff numbers and changes to organizational structures. From an academic perspective, the current study’s findings hold theoretical importance to management scholars interested in the various downsizing strategies used to enhance performance in organizations. Also, by empirically reviewing the various aspects of downsizing strategies used by commercial banks in Kenya, this study contributes the existing knowledge in this area.